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Increase to the national minimum wage

The draft National Minimum Wage (Amendment) Regulations 2017 has now been published. This sets out the proposed changes to the National Minimum Wage (NMW) and National Living Wage (NLW) due to take effect from 1 April 2017.

National Living Wage

The NLW applies to workers aged 25 and over and is proposed to increase to £7.50 per hour from the current rate of £7.20 per hour.

National Minimum Wage

The following changes to the NMW hourly rates are proposed:

The standard adult rate for workers aged 21 to 24 increases from £6.95 to £7.05

The development rate for workers aged 18 to 20 increases from £5.55 to £5.60

The young workers rate for non-apprentices aged under 18 but above compulsory school age increases from £4.00 to £4.05

The apprenticeship rate for apprentices aged under 19 and those aged 19 and over who are in the first year of their apprenticeship increases from £3.40 to £3.50.

Accommodation offset limit

There is also a proposal to increase the maximum daily accommodation offset limit from £6.00 to £6.40. This means that from 1 April 2017 the value of any accommodation supplied should not exceed £44.80 per week, increasing from £42.00.

What you need to do

Whilst the proposed rates will not come into force until 1 April 2017, it is important to ensure that you are ready for the changes as there may be some members of staff who are affected by the NMW/NLW increase. If this is the case, we recommend taking the following steps:

Take the relevant payroll action

Write to all affected employees to inform them of their new rate of pay

Diarise the birthdays of your employees aged under 25 and note when their rate of pay will increase

Review pension contributions which may need to be updated (typically calculated as a proportion of basic pay)

Review the affected employees to see whether they will now fall within the scope of pension automatic enrolment, maternity pay etc.

Review those employees with childcare vouchers as they may now be under the minimum/national living wage (salary sacrifice reduces the amount of pay which counts for minimum wage purposes)

Manage the expectations of other staff who consider they should also be entitled to a pay increase.

What next?

It is important that you are kept informed of changes to the NMW/NLW. The rates increase regularly and the implications of paying your staff below the correct amount could have a detrimental effect on your business, with penalties ranging from ‘naming and shaming’ to criminal prosecution. Keep an eye on our blog to ensure you are up to date with any proposed changes to the current rates.

Further information

For further advice, contact our specialist employment team on 01392 207020 or e-mail employment@tozers.co.uk.